While you can refinance your car with the same lender, there’s more to the decision-making process than just picking the lender that currently has all of your account information.
If your lender does offer auto refinance loans, you shouldn’t just assume they are necessarily the best option out there. Different lenders offer different rates, loan terms, and fees, so it’s important to shop around. Below, learn more about how refinancing works with the same lender and when it makes sense to explore elsewhere.
Key Points
• Refinancing a car loan can lead to a lower interest rate, reduced monthly payments, faster loan payoff, or removal of a cosigner.
• Comparing offers from multiple lenders can be a smart step in securing the best interest rate, terms, and fees.
• Refinancing with the same lender is feasible and might be simpler, but it’s not always the optimal choice or best deal.
• Before refinancing, consider rates, terms, fees, other loan details, and potential prepayment penalties.
• Refinancing can save significant amounts of money, making it a valuable option for those looking to optimize their car loan.
What Does It Mean to Refinance a Car?
Refinancing a car means replacing your current auto loan with a new one, ideally with a more favorable interest rate or better terms. Rather than making payments on your old loan, you’ll pay it off with the new loan and start making payments on that.
Why Would You Want to Refinance?
There are many reasons to refinance your car, including:
• Lowering your interest rate. This is one of the best reasons to refinance. A lower interest rate can both lower your monthly payments and reduce the amount you pay in interest overall, assuming you keep your loan term the same or shorter.
• Paying off your loan faster. This involves shortening your loan term. If you secure a lower interest rate and shorten your loan term, you’ll not only pay off your loan faster, but you’ll also save money in interest in the long run. However, your monthly payment might go up.
• Reducing your monthly payments. If you refinance your car and choose a longer loan term, your monthly payments most likely will decrease. While this typically means you’ll pay more in interest over the life of the loan, sometimes reducing payments is necessary to keep you afloat during hard financial times.
• Removing a cosigner. If you took out your original auto loan with a cosigner, you can choose to remove them by refinancing, assuming you can qualify for the new loan on your own.
Is It Possible to Refinance With the Same Lender?
If you’re thinking of refinancing, you may be wondering if you can do so with the same lender. In most cases, the answer is yes — but that doesn’t mean it’s automatically the right decision for you.
When you first start thinking about refinancing your auto loan, it’s natural to consider your current lender, especially if you’ve had a positive experience. Not all auto lenders offer refinancing, though. Most do, but it’s a good idea to double-check that this option is available before you do more digging.
Can you refinance your auto loan with the same bank? Absolutely. Is it always the best loan offer available? Not necessarily. And you won’t know for sure unless you shop around.
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When Does It Make Sense to Refinance?
There are many pros and cons to auto refinancing. Here are some of the most common situations in which it makes sense to refinance:
You Now Qualify for a Lower Interest Rate
If interest rates go down or you have built your credit score, you could save money with a lower rate. Refinancing may be right for you if you qualify for an interest rate that’s lower than your current auto loan rate.
You Have a Helpful Cosigner
If your credit score isn’t very high, refinancing with a cosigner could also help you pay less in interest. Refinancing may be right for you if you have a creditworthy cosigner who can help you qualify for an auto refi loan that’s more favorable than what you currently have.
Likewise, you may have signed your original auto loan with a cosigner and now you want to remove them from the loan. If you can qualify on your own, refinancing your car will allow you to do so.
You Want to Lower Your Monthly Payment
You might be able to get a longer loan term by refinancing. This means you’ll be making payments longer, but your monthly payment will be less. Keep in mind that by extending your term, you may end up paying more in interest over the life of the loan. However, if you need a lower payment, refinancing may be right for you in order to make ends meet.
Your Car Is Aging or Has High Mileage
Many lenders restrict your ability to refinance a car loan once the vehicle reaches a certain age or mileage mark. If your car is close to 10 years old or is approaching 100,000 miles, then it might be time to crunch the numbers to see if one last refinance makes sense. Refinancing a car with high mileage is possible and may be right for you depending on your personal circumstances.
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Is It Easier To Refinance With Your Current Lender?
When you apply to refinance your auto loan, you’ll need to submit documents related to your current loan, including the loan agreement.
If you’re applying to refinance through your current lender, it will probably already have that paperwork on hand. But while it may seem easier to let your current lender handle this step on its own, you should still find and review that information yourself before you apply to refinance. That way you can check the contract for prepayment penalties and your exact payoff amount.
It’s also important to check your current interest rate to figure out whether or not you’re getting a better offer with a refinance.
Even if it does seem easier to refinance with a lender you’re already working with, it’s crucial to rate-shop and make sure you’re meeting your financial goals. If you find a better deal elsewhere, it may not be that much harder to switch. Most lenders create an easy, streamlined application process.
In summary, it can be easier to get a refinancing loan from the lender you already know. But “easier” doesn’t automatically mean it’s better.
How to Refinance With the Same Lender
How exactly to refinance an auto loan may differ slightly when you’re applying with the same lender. Here are the steps for how you may refinance with the same lender:
• Gather the required documentation. Even if you have a history of making your car payments on time, you’ll still probably need to provide proof of income. This could be recent paystubs or a tax return.
• Confirm and update your personal information, including your address and how much you spend on housing each month. The lender likely has other details about your current loan and vehicle. Nonetheless, it will probably pull a credit report to see where you stand today. Your credit score may drop by a few points temporarily if the lender conducts a hard pull inquiry into your credit report.
• Receive a loan offer based on your personal information and your vehicle information. The offer may include an interest rate, any fees, and the length of the loan term. Review all of these details and compare this offer to offers from other lenders to see which is the best option for you.
Why You May Want To Refinance With a Different Lender
Lenders all vary when it comes to rates, loan terms, and fees, so it’s always best to shop around in order to find the best auto refinance deal for your situation. While refinancing with the same lender may be easier, if you can save hundreds or thousands by going elsewhere, that may be worth your time and effort in the short term.
How To Refinance With a Different Lender
Even if you were interested in refinancing with your current car loan provider, you might find a better deal elsewhere and decide to change lenders. Here are the steps on how you may refinance with a different lender:
• Submit the required documentation. In addition to the financial and income verification you need to apply with your existing lender, a new lender will likely need information about your vehicle and current loan.
• Submit details about your vehicle. This includes the make, model, and year. You must also disclose the vehicle’s mileage and supply the lender with the vehicle identification number (VIN).
• Provide the current loan balance and lender’s contact information. The application may also require you to submit proof of auto insurance.
• Check your credit. The lender may check your credit report. This can result in a small, temporary drop in your credit score. But if there are multiple credit inquiries for the same kind of loan within a short period of time on your record, they’ll typically be counted as just one, since the credit score agencies understand that you’ve been shopping to find the best rates.
• Get prequalified, if possible. Some lenders may allow you to prequalify for a loan, which won’t typically result in a credit drop. But note that the offers you see that way aren’t guaranteed, especially if your financial situation changes before you actually apply for the loan.
• Apply for and accept the loan. Once you’ve selected the loan you want to apply for, the process will be similar to that when you apply with the same lender, except that when you’ve received and accepted the loan terms, your new lender will transfer the funds to pay off your old loan and your new payments will begin.
The Takeaway
It is generally possible to refinance your auto loan with your current lender. It may even be a bit easier than filling out an application with a new lender. However, it doesn’t mean that it’s financially the best option for you. In order to find the best auto refinance loan, it’s best to shop around to find the best rates and terms for your particular situation.
If you’re seeking auto loan refinancing, SoFi is here to support you. On SoFi’s marketplace, you can shop and compare financing options for your car in minutes.
FAQ
Is it better to refinance with the current lender?
No, it’s not necessarily better to refinance with your current lender, even if the process is easier. In addition to considering refinancing with your current lender, compare online auto loan refinancing rates with multiple lenders. Once you look at a few different offers side by side, you can likely see which one best helps you meet your goals, whether it’s saving on your interest rate or lowering your monthly payments.
When does it make sense to refinance with the same lender?
It makes sense to refinance with the same lender when that lender extends the best offer among multiple lenders. That may be the case — and maybe your current lender can even offer you a loyalty rate discount on top of expediting the application process. But if you get a better offer from another lender, you may be better off switching.
When does it make sense to refinance with a different lender?
Depending on your financial situation and goals, if another lender offers you a lower interest rate or lower monthly payments, then it may make sense to accept that refinance offer. There are some pitfalls to watch out for, however. Make sure there are no hefty upfront fees that could reduce your potential savings. Also confirm that there’s no prepayment penalty in case you want to pay off your loan early.
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